Simone Lawson
Tariffs are taxes imposed on imported goods and services by the federal government. While the US Constitution grants Congress the power to levy tariffs, the President and the executive branch have controlled when and how tariffs are placed on goods entering the United States in recent years. This has led to concerns about the lack of transparency and accountability in tariff impositions, as well as the potential infringement on the separation of powers and legislative role in shaping trade policy. The delegation of tariff-setting authority to the executive branch has been justified as a pragmatic adaptation to the fast-paced global environment, enabling quick responses to rapid changes in international trade markets. However, critics argue that it results in unilateral actions that bypass legislative oversight and popular support, potentially causing economic disruptions and strained international relationships.
| Characteristics | Values |
|---|---|
| Power to impose tariffs | Granted to Congress by the Constitution |
| Congress has, in recent years, delegated this power to the President and the executive branch | |
| The President can impose tariffs under certain conditions | |
| The legislative branch retains oversight to ensure tariffs are used in accordance with national interests and the rule of law | |
| The Supreme Court has emphasized that any delegation of power must include an "intelligible principle" to direct and limit the President's use of this authority | |
| The President can negotiate and respond to immediate threats, but the imposition of generalized tariffs requires congressional approval | |
| The President's authority to impose tariffs balances swift executive action with legislative oversight | |
| The executive branch's authority to impose tariffs is valuable in light of the current polarization in Congress, which has slowed down the legislative process | |
| The executive branch's authority to impose tariffs can result in unilateral actions that bypass broader legislative oversight and popular support, potentially leading to economic disruptions and strained international relationships | |
| The lack of transparency surrounding tariff impositions raises concerns about accountability and increases the risk of economic uncertainty |
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What You'll Learn
Tariffs are a form of tax on imports
Tariffs are a form of tax levied on imports. They are placed by governments on imported goods and services. The amount of tax imposed on an import is based on its value, including freight and insurance. Tariffs are also known as duties, and the two terms are used interchangeably.
The Constitution grants Congress the power to levy tariffs. The Constitution's Article I, Section 8 states: "The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, ... but all Duties, Imposts and Excises shall be uniform throughout the United States." However, Congress has, over time, delegated the task of setting tariff rates to the President as part of his foreign policy and trade negotiation duties. The President can also ask the Secretary of Commerce to determine if goods are being imported in a manner that threatens national security.
While the President does not have the direct power to set or impose tariffs on nations that trade with the United States, he can take such action if a law is passed by Congress granting him such powers. There are six statutory provisions that control how the President and the executive branch can use tariffs. Three of these provisions require federal agency investigations before a tariff can be imposed. The other three do not require an investigation, and one of them, the International Emergency Economic Powers Act of 1977, has been used by President Trump to impose tariffs on Canada, China, and Mexico.
Tariffs were once a significant source of revenue for the federal government, but their importance has diminished with the establishment of a federal income tax. Tariffs can still be used as a tool to protect American businesses, and they can also be used as a foreign policy tool.
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The US Constitution grants Congress the power to impose tariffs
While the President possesses significant authority to impose tariffs under specific circumstances, this power is derived from delegations by Congress and is framed by statutory directives and constitutional principles. The President's ability to impose tariffs operates within a framework designed to balance swift executive action with legislative oversight. For instance, Section 232 of the Trade Expansion Act of 1962 authorises the President to impose tariffs if an investigation determines that imports threaten national security. Similarly, Section 301 of the Trade Act of 1974 allows the President to impose retaliatory tariffs to counteract unjustifiable, unreasonable, or discriminatory foreign trade practices.
Despite the President's ability to impose tariffs in certain situations, Congress retains ultimate authority over tariff policy. The legislative branch plays a critical oversight role, ensuring that tariffs are used judiciously and in accordance with national interests and the rule of law. Congress has consistently revisited and adjusted delegations of power to the executive branch, demonstrating its commitment to balancing responsiveness with oversight.
Historically, tariffs were the main source of revenue for the federal government until the Civil War. After the war, tariffs resumed their role as a primary revenue source until the establishment of a federal income tax in 1913 with the 16th Amendment. The need for tariffs as a primary revenue source diminished, but they remained in place at high levels to protect American businesses.
In conclusion, while the President has some influence over tariff policy, especially in areas of foreign policy and national security, the US Constitution grants Congress the overarching authority to impose tariffs. This power is derived from Article I, Section 8, and Congress retains the ability to revoke or adjust delegations of authority to the executive branch as needed to maintain the balance of powers.
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The President can impose tariffs under certain conditions
While the power to impose tariffs is vested in Congress, the President can impose tariffs under certain conditions. The Constitution grants Congress the power to levy tariffs, but in recent years, Congress has passed laws that have enabled the President and the executive branch to exert control over when and how tariffs are placed on goods entering the United States.
The first major law passed by the First Congress in 1789 dealt with tariffs, stating that tariffs were necessary for the support of the government and the protection of American manufacturing. Tariffs became the main source of the federal government's revenue until the Civil War. However, in the 1890s, Congress passed the Wilson-Gorman Tariff Act, which lowered tariff rates and established a permanent federal income tax.
Since the 1930s, Congress has delegated tasks such as setting tariff rates to the President as part of his foreign policy and trade negotiation duties. The Reciprocal Trade Agreements Act of 1934 marked a pivotal shift, empowering the executive branch to negotiate trade arrangements with other nations. This was not an abandonment of congressional authority but an adaptation to enable quick responses to rapid changes in international trade markets.
The Trade Expansion Act of 1962 and the Trade Act of 1974 continued this trend, adding provisions like Section 232 and Section 301, which allowed the President to impose tariffs. Section 232 of the Trade Expansion Act of 1962 authorizes the President to ask the Secretary of Commerce to determine if goods are being imported in a manner that threatens national security. If the Secretary reports affirmative findings, the President can take action, including placing tariffs. Section 201 of the Trade Act of 1974 allows the President to impose tariffs if the U.S. International Trade Commission (ITC) finds that an import surge is threatening a U.S. domestic industry.
Section 301 of the Trade Act of 1974 allows the United States Trade Representative (USTR) to authorize tariffs on foreign countries that restrict U.S. commerce in “unjustifiable,” “unreasonable,” or “discriminatory” ways. If the USTR confirms such behavior after an investigation, the President has the discretion to allow the USTR to impose tariffs for at least four years.
Among the three provisions that allow the President to act on his own to impose tariffs without an investigation, only one has been used: the International Emergency Economic Powers Act of 1977. This act allows the President to declare an emergency and then use his extensive economic powers to regulate or prohibit imports.
While the President possesses significant authority to impose tariffs, this power is framed by statutory directives and constitutional principles that uphold the balance of powers. The legislative branch retains its critical oversight role, ensuring that tariffs are used judiciously in accordance with national interests and the rule of law.
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Congress has delegated tariff-related tasks to the President
The US Constitution grants Congress the power to levy tariffs. However, Congress has, over time, delegated tariff-related tasks to the President. This delegation of authority has resulted in the President and the executive branch controlling when and how tariffs are imposed on goods entering the United States.
The first major law passed by the First Congress in 1789 dealt with tariffs, stating that duties were necessary for the support of the government and the encouragement and protection of domestic manufacturing. Tariffs became the primary source of revenue for the federal government until the Civil War.
Since the 1930s, Congress has delegated tasks such as setting tariff rates to the President as part of his foreign policy and trade negotiation duties. One example of this delegation is the Reciprocal Trade Agreements Act, passed in 1934, which allowed President Franklin Roosevelt to change tariff rates by 50% and negotiate bilateral trade agreements without additional approval from Congress.
There are currently six statutory provisions that govern how the President and the executive branch can use tariffs. Three of these provisions require federal agency investigations before a tariff can be imposed. For example, Section 201 of the Trade Act of 1974 allows the President to impose tariffs if the US International Trade Commission (ITC) finds that an import surge is threatening a US domestic industry. The other three provisions do not require an investigation, and one of them is the International Emergency Economic Powers Act of 1977, which allows the President to declare an emergency and use his economic powers to regulate or prohibit imports.
While Congress has delegated tariff-setting authority to the President, it still retains the power to limit or expand these powers through legislation. For instance, Congress could revoke the authority it has granted or require the President to seek approval for each tariff proposal from Congress.
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Tariffs can be used as a foreign policy tool
Tariffs are a form of tax placed by a federal government on imported goods and services. They are a powerful tool that can be used to achieve various economic and political objectives, including as a foreign policy instrument. While the president does not have direct authority to set or impose tariffs, Congress has delegated tasks such as setting tariff rates to the chief executive as part of their foreign policy and trade negotiation duties.
Secondly, tariffs can be used to protect and promote domestic industries. By making foreign goods more expensive, tariffs encourage consumers to purchase domestic goods, thereby increasing demand for locally produced items and boosting the domestic economy. This can be particularly effective in situations where a country has a significant trade surplus, as it can help shift the cost of weak demand onto trade partners, as seen in the case of the Smoot-Hawley Tariff Act of 1930.
Thirdly, tariffs can be a tool for reciprocity in trade negotiations. By imposing tariffs on imports from a country that does not offer similar market access, a government can seek to achieve more favourable trade terms or encourage the targeted country to reduce its own tariffs. This can lead to a "trade war," where both sides impose tariffs on each other, but it also creates incentives for cooperative trade policymaking, as outlined by Bagwell and Staiger in 2002.
It is important to note that while tariffs can be a powerful foreign policy tool, they also carry risks and potential unintended consequences. They can lead to retaliation from the targeted countries, affecting export demand and sales in those markets. Additionally, they can impact inflation, competitiveness, and international cooperation. Therefore, the use of tariffs as a foreign policy instrument requires careful consideration and a thorough understanding of the potential economic and political ramifications.
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Frequently asked questions
The US Constitution grants Congress the power to impose tariffs. However, Congress has, at times, delegated this power to the President and the executive branch.
While the President does not have the unilateral power to impose tariffs, they can do so under certain conditions. For example, the Trade Expansion Act of 1962 and the Trade Act of 1974 allow the President to impose tariffs in response to national security concerns or unfair foreign trade practices.
Delegating tariff powers to the President can lead to concerns about unchecked executive action and policy instability. It can also result in unilateral actions that bypass legislative oversight, potentially causing economic disruptions and strained international relationships.
The US Constitution bars states from setting their own tariffs on goods, with some exceptions. According to Article I, Section 10, Clause 2, "No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing its inspection Laws."
Tariffs were once a major source of revenue for the federal government and played a significant role in the early debates surrounding the Constitution. Over time, as the importance of tariffs as a revenue source diminished with the introduction of income tax, they evolved into a tool of foreign policy and market protection.
